updated 12/11/2006 2:44:05 PM ET 2006-12-11T19:44:05

A federal judge Monday upheld an order approving Delta Air Lines Inc.’s request to terminate its pilots’ pension plan, over the objections of 223 retired pilots.

The group of retired pilots had appealed a U.S. Bankruptcy Court judge’s ruling in September that said Atlanta-based Delta had met the requirements for its distress termination of the pension plan.

Some had argued that Delta’s assumption about the number of pilots who would retire early if their lump-sum pension payment option was restored was flawed. They also argued that Delta had not explored other ways to reduce the number of early retirees before seeking termination of the pension plan.

But U.S. District Judge Denise Cote said in her ruling that Delta met its burden of proving that the pension termination was necessary as part of its effort to emerge from bankruptcy.

“In the face of this substantial evidence, appellants point to a handful of specific facts that they claim debtors were required — but failed — to demonstrate,” Cote wrote. “These arguments are flawed, however, as, in every case, debtors either made a sufficient showing of the fact in question or were not required to do so.”

Delta’s active pilots did not object because they agreed not to as part of a concessions package they reached with management earlier this year.

Meanwhile, on Dec. 4, Delta and the Pension Benefit Guaranty Corp. reached a settlement over some key issues related to the carrier’s request to terminate its pilots’ pension plan.

Under the agreement, the government’s pension insurer would get an unsecured claim of $2.2 billion against the nation’s third-biggest carrier. That would put it in line with other unsecured creditors for compensation after Delta emerges from bankruptcy. But unsecured creditors typically recover only a fraction of what they are owed.

Delta said in a bankruptcy court filing that it had agreed to provide in its reorganization plan that the PBGC would get $225 million in senior unsecured notes, which are supposed to be repaid in full after a company emerges from bankruptcy.

Termination of the pension plan would mean the PBGC would take over the pilot pension and pay the pilots’ benefits up to a maximum limit, in many cases less than what they were expecting under the company plan.

A hearing on the agreement between Delta and the PBGC is scheduled for Dec. 20.

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